Economist: BSF effective if market pressures are technical and temporary

In such situations, the presence of the government as a buyer can help halt panic and restore market liquidity. Jakarta (ANTARA) - Economist from the Center of Reform on Economics (CORE) Yusuf Rendy Manilet believes that reactivating the Bond Stabilization Fund (BSF) can effectively safeguard the stability of the government bond market if market pressures are technical and temporary. The pressures in question include sell-offs due to investors experiencing short-term price losses or chain reactions that do not fully reflect economic fundamentals. “In such situations, the presence of the government as a buyer can help halt panic and restore market liquidity,” Yusuf said when contacted by ANTARA in Jakarta on Friday. This instrument is also deemed effective when the market experiences a buyer drought due to a wait-and-see attitude. Additionally, the BSF is important to prevent spillover risks to the broader financial system, given the significant ownership of government bonds (SBN) by banks, insurance companies, and pension funds. He exemplified that if the market begins to worry about the direction of fiscal policy, debt interest burdens, or the consistency of economic policies, then buying bonds in the secondary market will not immediately eliminate investor concerns. According to him, some of the current pressures are heading in that direction, with the market scrutinising the widening deficit, weakening primary balance, and increasing government financing needs. In other words, market concerns are no longer merely short-term volatility but the direction of future policies. “Not to mention global factors. As long as US interest rates remain high, US Treasury yields remain attractive, and the dollar is still strong, emerging markets will indeed face pressures. In such conditions, the BSF’s capability is also limited because it cannot counter global market gravity,” he said. According to him, it would be better if the instrument were already available and ready to use even if not always activated, rather than being prepared only when the market has entered a panic phase. “There is indeed pressure in the market. The 10-year SBN yield has risen quite rapidly from around 5.9 percent at the end of last year to around 6.7 percent in April 2026. Outflows of foreign funds from the bond market are also starting to appear and are adding pressure to the rupiah. But compared to previous crisis episodes, the scale is actually still relatively contained,” he explained. Learning from the experiences of other countries, according to him, South Korea is the most relevant example in the use of BSF. That country once utilised the BSF after the Asian crisis and prepared it again during the 2008 global crisis. He explained that South Korea also carried out major reforms in the financial and corporate sectors. The BSF, in this case, was only used as a temporary instrument while carrying out fundamental improvements. “And once the situation was more stable, the stabilisation fund was more often just announced without being used on a large scale. This means that the psychological effect and policy credibility are often more important than the intervention itself,” he added. Yusuf added that conversely, Indonesia can also learn from Japan and China. Japan supported its bond market for too long through yield controls, ultimately facing difficulties in normalising when the global cycle changed.